World stock markets and the euro soared today as investors cheered the European Union's $1 trillion (£650 billion) plan to defend the embattled 16-country currency and keep a spreading debt crisis from damaging the global economic recovery.

But there was concern that Alastair Darling had signed Britain up to the deal - at a potential cost of £10 billion - even though he could lose his job as Chancellor in a matter of days.

The bail-out could also form a dividing line between the Conservatives and the Liberal Democrats as they attempt to form a governing coalition.

Shadow chancellor George Osbourne has privately voiced 'reservations' about a deal that is
likely to be Labour’s last act in government.

But investors across the globe remained upbeat about the move this afternoon.

Alistair Darling pictured at an Extraordinary Ecofin Council meeting, in Brussels yesterday

After last week suffering some of the biggest losses since the
height of the financial crisis in 2008, European markets rebounded
decisively. The euro jumped above $1.3071, after wallowing at a
14-month low of $1.2523 on Friday.

U.S. stocks also surged. In the opening minutes of trading, the Dow Jones industrial average is up 404, or 3.9 per cent, to 10,786.

The Standard & Poor's 500 index is up 39, or 3.5 percent, to 1,150.20. The Nasdaq composite index rose 103, or 4.5 per cent, to 2,368.

Crucially, borrowing costs for debt-laden countries plummeted. The
difference between yields on Greek 10-year bonds and their benchmark
German equivalents was at 4.84 percentage points this morning, down
massively from a record 10.25 points last week.

The historic deal comprises of £383 billion in loans or guarantees from the 16 eurozone countries, another £52billion in loans from the EU budget and £217billion from the International Monetary Fund.

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But Britain could be exposed to extra payments if a member state defaulted on loans using the EU budget fund and the IMF.

Speaking on BBC Breakfast, Mr Darling said: 'There is about 440 billion euros which the eurozone countries have put together. That is their responsibility - we are not involved in that.

'The second element is that there is additional help from an existing facility going to be made available to any member state that gets into difficulties.

'If there was a 100 per cent default - and remember all these loans are made with strict IMF (International Monetary Fund) conditions and strict European Union conditions - then our exposure would be about £8 billion.'

Back in the black: How the FTSE moved higher today after the euro bailout deal

Mr Darling said most countries in the world are members of the IMF which lends money to countries in difficulties, thereby acting as a kind of 'big insurance scheme' with very stringent conditions attached to loans.

He said: 'The good thing about it is that it comes with very stringent conditions so countries generally don't default.

'Therefore this is actually quite a good insurance scheme for us. Put another way - if we didn't do it, the risk is the countries would go down and there would be a far greater loss on us.'

Details of the deal were initially thrashed out at a meeting of EU leaders on Saturday in which Britain played no part.

That
fund already offers tens of billions of euros to non-eurozone countries
but will now be widened so all 27 EU countries can grab the funds.

Ministers
from the 16 eurozone countries have already approved a £95billion
bail-out for Greece.

But economists estimate that if Portugal, Ireland
and Spain eventually require similar three-year bail-outs, the total
cost would add up to £430billion.

French Minister for Economy Christine Lagarde attends an Extraordinary Ecofin Council meeting, in Brussels

Britain pays 10 per cent
of the Commission's bill and if the loan fund had to take the strain,
Britain's share of the liability would be £43billion.

Mr
Darling said he had spoken to Shadow Chancellor George Osborne and his
Liberal Democrat counterpart Vince Cable during the negotiations.

He
refused to disclose details of his discussions with Mr Osborne and Mr
Cable but the bailout could become a major stumbling block in reaching
any deal between the euro-sceptic Tories and the pro-European Lib Dems.

Although
Mr Darling was powerless to stop the rescue package as the decision was
taken by majority voting, Tory sources said that Mr Osborne is highly
sceptical about the plan that he would inherit if he became Chancellor.

A
Conservative source said there was no guarantee that a Tory government
would back the deal and they would demand to see the details.

European policymakers agreed on the dramatic intervention this morning after coming under pressure from Asia and America to help shore up global stability.

Failure to contain the Greek debt crisis last week led to a 4.1 per cent drop in the euro and increased pressure on Portugal and Spain.

As the package was unveuiled in the early hours this morning, the U.S. Federal Reserve also reopened a currency 'swap' program to ship billions of U.S. dollars overseas in a bid to pump more short-term cash into the financial system and ensure banks have the dollars they need.

Separately, the ECB jumped into the bond market, saying it is ready to buy debt from the eurozone - EU nations that use the euro - to shore up liquidity in 'dysfunctional' markets.

Japan's central bank decided today to restart a temporary dollar-swap agreement with the US Federal Reserve, as part of a global effort to stabilise financial markets roiled by the European debt crisis.

At an unscheduled monetary policy meeting, board members also voted unanimously to keep its key interest rate at 0.1 per cent.

The Bank of Japan's decision follows a move by the Federal Reserve to ship US dollars overseas to limit fallout from Greece's debt problems.

Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank also are reportedly involved in the dollar swap effort.

The coordinated moves are designed to ease liquidity strains in US dollar short-term funding markets in Europe, the Bank of Japan said.

'The Bank will continue to strive to maintain financial market stability through proper implementation of money market operations,' it said in a statement.

There was cautious endorsement from analysts who still feared the measures may not be enough to save the common currency, which was adopted by many of the EU's member states in 1999.

'It buys time. We don't know if it will be enough. They're trying to give the impression that they're still united. They've bought some breathing space but that's all,' said Song Seng Wun, an economist with CIMB-GK Research in Singapore.

'This perhaps just postpones the inevitable, the euro may have to ultimately give way, that's the worst case scenario.'

The EU's monetary affairs commissioner, Olli Rehn, said the agreement 'proves
that we shall defend the euro whatever it takes.'

He said the arrangement would be 'particularly
crucial for countries under speculative attacks in recent weeks'.

The EU ministers said in a statement: 'We are facing such
exceptional circumstances today and the mechanism will stay in place as long
as needed to safeguard financial stability.'

Markets had battered the euro and Greek government bonds even as EU leaders insisted for days that Greece's problems were a unique combination of bad management, free spending and statistical cheating that doesn't apply to other euro-zone nations.

Market jitters also partly contributed to a nearly 1,000-point drop in the Dow Jones industrials last Thursday.

America's Securities and Exchange Commission is meeting with heads of exchanges Monday to discuss how conflicting trading rules may have exacerbated the historic stock market plunge.

The idea being advocated by France and Germany would give
government-backed loan guarantees to the euro's failing economies,
leaving taxpayers liable for all their debts.

As he arrived
in Brussels, Mr Darling made clear that the UK would not sanction such
a move - which required unanimous support - but said the eurozone
countries could take that step on their own if they wanted.

He
said Britain would 'play our part' in helping to ' stabilise the
situation', but added: 'When it comes to supporting the euro, obviously
that is for the eurozone countries.' But he was effectively forced to
support the separate balance of payments loan fund after other EU
leaders made clear that under the Lisbon treaty Mr Darling was
powerless to stop it being passed.

Fears of a 'stitch up'
were fuelled after President Nicolas Sarkozy's office released a
statement saying France and Germany had agreed measures to deal with
the financial crisis.

Critics warned that EU leaders were taking advantage of the confusion over the status of the British government.

Mats
Persson, director of Open Europe, a Brussels reform think tank, said:
'What we're were told would never happen has now occurred.

'British taxpayers have become directly liable for the mess created by the failed euro experiment.

'While it's in everyone's interest for Europe's economy to stabilise, this deal could easily spiral out of control.'

Treasury
officials stressed that the fund Britain is signed up for will not
involve putting in any money up front. The UK would only be landed with
a multi-billion pound bill if there were defaults.